Why Do Pension Funds Invest in German Property

Why Do Pension Funds Invest in German Property

Why consider investing in German property?

A report recently published by Price Waterhouse Cooper (PWC) and the Urban Land Institute (ULI) looked at what the future might hold for the domestic housing market post Brexit and which countries might benefit over the medium to long term in a “New Europe”

Many people have previously been sceptical about property investments overseas, with horror stories around unfinished hotel and golf complexes abound. However investments into residential developments in Europe through companies who have undergone extensive due diligence are gaining in popularity and may make those experiences a distant memory as the European real estate industry continues to be upbeat about most of its major markets.

Could German property be the future?

According to one contributor to the Emerging Trends Europe survey “Germany replaces the UK as Europe’s Number 1 safe haven” Berlin, Hamburg and Frankfurt occupy the top three places in the league table, while Munich is at number 5. Frankfurt has become ever more popular for investors as it is home to many of the countries business and finance institutions.

Meanwhile back at home some property experts have a more negative view of the UK’s main cities. London now languishes fourth from bottom at number 27, just ahead of Istanbul, Athens and Moscow. And the UK’s other main cities are also suffering with Birmingham, one of last year’s top 10 down to 22, with Manchester and Edinburgh just behind it.

How can I invest?

There are a number of options open to individuals who wish to invest in residential property in Germany. For the vast majority of people a direct investment or joint venture in a foreign country would not be an arrangement that they would ever wish to embark upon. By far the most popular method of benefitting from the investment returns offered by German property investments are Property Bonds or Loan Notes. These offer a fixed return, typically between 8 and 12% over a fixed term, typically between 2 and 5 years with security over a tangible asset for additional peace of mind.

Many of the companies involved in these developments, for example Dolphin Trust raise funds through both cash and pension investments and are approved to deal with pension investments by numerous SIPP and SSAS pension providers and trustees. The model for this particular investment is to purchase existing listed buildings from the German government at a tax incentivised discount, they then sell these properties off plan to higher rate German tax payers who also receive a tax incentive for the purchase before converting these buildings into luxury apartments.

In summary, for those who are concerned what the UK property markets are going to do post Brexit, who have seen the returns from cash on deposit reduce in real terms and those wishing to leave behind stock market volatility and invest their pension funds in what many believe will be a rising and stable market in the years to come, an investment in German property may provide the answer.

If you’d like to find out more call us on 020 3907 8400 to speak with one of our experienced consultants.

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